Question

ACC 926 Assignment #1 (Chapter 2)       

Select among the list of words the one that best justifies the following accounting procedures.  A term may be used more than once, or not at all.  Choose the best answer.

a.	Historical cost	f.	Economic Entity	l.	Full disclosure
		g.	Materiality	m.	Comparability
b.	Relevance	h.	Fair Value
c.	Monetary unit	i.	Periodicity	n.	Representational Faithfulness Timeliness
d.	Going concern	j.	Matching	o.
e.	Control	k.	Revenue Recognition

_____   1.  Recording significant subsequent events in the Notes to financial statements.

_____   2.  Ignoring inflationary affects when preparing Financial Statements.

_____   3.  Recording Goodwill at the time of purchasing another entity.    

_____   4.  Recording Warranty expense, for a 2 year warranty product, in the year the products are sold.

_____   5.  A food processing company uses the same accounting principle for revenue recognition as do its competitors.

_____   6.  This is the underlying principle for the use of Accrual accounting and historical cost.  

_____   7.  Reporting information which is faithfully representative of economic events.

_____   8.  A company makes a note disclosure of a loss due to a large lawsuit that has been filed against it.

____   9.   Supplies are expensed rather than capitalized due to its dollar value.

____ 10.   Investment in Land is recorded at is current market values.

_____ 11.  Determining which companies to include in the consolidated Financial Statements.

_____ 12.  The need to create Consolidated Financial statements at the end of the year.

Presented below are accounting procedures and practices in Sabina Corp. For each of these items, list the assumption OR principle that is violated.

_____  13. Because the company's income is low this year, a switch from accelerated depreciation to straight-line depreciation is made this year without any adjustments to prior years.

_____ 14. The company decides not to record a large lawsuit Loss on the Income Statement and a Liability on the Balance Sheet although the lawyers feel they will lose the case.

______15. The company’s president feels it is not necessary to prepare Financial Statements within the 6 months although the accountant has communicated that Financials are due in that timeframe.

Answer 1

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Full disclosure	1.  Recording significant subsequent events in the Notes to financial statements.
Monetary unit	2.  Ignoring inflationary affects when preparing Financial Statements.
Control	3.  Recording Goodwill at the time of purchasing another entity.
Matching	4.  Recording Warranty expense, for a 2 year warranty product, in the year the products are sold.
Comparability	5.  A food processing company uses the same accounting principle for revenue recognition as do its competitors.
Matching and Historical cost	6.  This is the underlying principle for the use of Accrual accounting and historical cost.
Representational Faithfulness	7.  Reporting information which is faithfully representative of economic events.
Full disclosure	8.  A company makes a note disclosure of a loss due to a large lawsuit that has been filed against it.
Materiality	9.   Supplies are expensed rather than capitalized due to its dollar value.
Fair Value	10.   Investment in Land is recorded at is current market values.
Control	11.  Determining which companies to include in the consolidated Financial Statements.
Control	12.  The need to create Consolidated Financial statements at the end of the year.
	Presented below are accounting procedures and practices in Sabina Corp. For each of these items, list the assumption OR principle that is violated.
Comparability, Representational Faithfulness	13. Because the company's income is low this year, a switch from accelerated depreciation to straight-line depreciation is made this year without any adjustments to prior years.
Materiality, Full disclosure	14. The company decides not to record a large lawsuit Loss on the Income Statement and a Liability on the Balance Sheet although the lawyers feel they will lose the case.
Periodicity, Timeliness	15. The company’s president feels it is not necessary to prepare Financial Statements within the 6 months although the accountant has communicated that Financials are due in that timeframe